1) Standing at events in order to see better and talking more loudly at crowded parties are examples of

a. Multi-person prisoner's dilemmas

b. The sunk-cost fallacy

c. Failure to appreciate the average-marginal distinction.

d. irrational exuberance

2) Which of the following statements is NOT true about the game whose payoff matrix is shown?

Firm Y

Advertise Don't advertise

Advertise	10 for X 2 for Y	8 for each
Don't Advertise	4 for each	2 for X 10 for Y

a. Each firm has a dominant strategy

b. The game is a prisoner's dilemma

c. It does not matter which player moves first

d. Individual interests and collective interests coincide

3) Firm X and Firm Y both face the decision of whether to invest in a new process. Games 1, 2, and 3 show how their profits depend on the combination of decisions they make under three different scenarios. Which of the three games is a prisoner's dilemma?

Game 1 Firm Y

Don't Invest Invest

Don't Invest	4 each	2 for X 10 for Y
Invest	10 for X 2 for Y	8 each

Game 2

Firm Y

Don't Invest Invest

Don't Invest	10 for X 2 for Y	4 each
Invest	8 each	2 for X 10 for Y

Game 2

Game 3

Firm Y

Don't Invest Invest

Don't Invest	8 each	2 for X 10 for Y
Invest	10 for X 2 for Y	4 for each

a. Games 1, 2, and 3

b. Game 1 and 3 only

c. Game 2 and 3 only.

d. Games 1 and 2 only.